SAP Bows to Oracle on TomorrowNow, Argues Damages

August 9, 2010 Timothy Prickett Morgan

The third-party support war–more of a skirmish now–between software giants SAP and Oracle continues to grind on, and last week, Oracle gained a few yards of turf. The new top brass at the German software company said in a pretrial filing in the Oracle vs. SAP lawsuit that was filed in March of 2007 that it would accept financial responsibility for any judgment against its former TomorrowNow unit.

TomorrowNow, you will remember, was established by some ex-PeopleSoft employees to provide third-party support for PeopleSoft applications, which was eventually expanded to cover Siebel Systems and JD Edwards software suites. Being a bit of a wiseguy, SAP acquired TomorrowNow in 2005, and in 2007 Oracle sued SAP and TomorrowNow in the U.S. District Court for the Northern District of California in San Francisco alleging “corporate theft on a grand scale” and saying the damages were in excess of $1 billion. In July 2007, after reviewing how TomorrowNow gained access to and used Oracle’s intellectual property in its third-party support biz, SAP conceded that mistakes were made and the following July, SAP shut the unit down completely.

The two companies have not settled the matter, and the case is due to go to trial on November 1. In an effort to get the court to think rationally, SAP filed a pretrial motion last Thursday saying it would bite the bullet, even though SAP did not know about the particulars of TomorrowNow’s service operations and did not itself engage in the copying or downloading that is alleged in Oracle’s lawsuit. (Well, when you buy a company, you buy its past behavior.) SAP says that it will argue that Oracle’s damages are “vastly overstated.”

“By accepting responsibility for TomorrowNow’s actions, SAP is taking a decisive move to focus the issues in the case,” explained Werner Brandt, SAP’s chief financial officer, in a statement. “We acknowledged three years ago that TomorrowNow made mistakes, and we took direct action to address Oracle’s concerns, including shutting down the company nearly two years ago. SAP is committed to compensating Oracle for the harm the limited operations of TomorrowNow actually caused. Oracle’s unreasonable damages claims are an unproductive distraction as we work to find a fair resolution in this case.”

Well, Larry Ellison has to pay for that Sun Microsystems acquisition and a new yacht somehow.

As previously reported in The Four Hundred, Oracle sued third-party application support provider Rimini Street back in February, on basically the same intellectual property grounds as it went after TomorrowNow. In April, Rimini Street, which offers support for PeopleSoft, Siebel, JDE, and SAP suites, countersued Oracle, vehemently denying the “false and malicious allegations” Oracle made in its suit and saying that what it does to support customers is not illegal. Rimini Street also alleged that Oracle was trying to destroy its business for the past five years–no, really?–using a mixed bag of copyright misuse, defamation, trade libel, disparagement, and unfair competition. The Oracle vs. Rimini Street suit and countersuit are filed in the U.S. District Court for the District of Nevada in Las Vegas, where Rimini is based.

Last month, privately held Rimini Street was bragging that its revenues were up nearly 50 percent in the first half of 2010 and that renewal rates for its third-party support services were running at 98 percent in the second quarter–the highest rate in the company’s history. The company said it had more than $32 million in bookings and 40 new customers for its Oracle and SAP support services for the first half. Rimini Street has just over 300 customers worldwide.

These relatively small numbers at Rimini Street would suggest that Oracle is hamming it up a bit on the TomorrowNow damages. But exaggerating for effect (and profit) is what the brashiest of the top brass do among the IT vendor community, and lawyers always pump up damages to get a big number to keep the jury from falling asleep in highly technical cases.

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